An attempt to think through the book.

Table of Contents

• 1. Book Classification
• 2. Book Background
• 3. Book Structure
• 4. Book Objective
• 5. Book Thinking
  • 5.1 Introduction
  • 5.2 Why So Much Inequality?
  • 5.3 History of Market Society
  • 5.4 Debt and Profit
  • 5.5 Banking
    • 5.5.1 Banking Before
    • 5.5.2 Banking Now
    • 5.5.3 State Intervention
    • 5.5.4 Pre-Modern vs Modern Money
    • 5.5.5 The Bankers and The State
    • 5.5.6 Unpayable Debts
    • 5.5.7 Public Debt
    • 5.5.8 Conclusion
  • 5.6 Two Conflicting Markets
  • 5.7 Automation
    • 5.7.1 Is Technology Benefitting Humanity?
    • 5.7.2 Why Humans are still Necessary?
    • 5.7.3 Mechanizing Humans
    • 5.7.4 Automate Fully?
    • 5.7.5 Speculation
  • 5.8 Money
    • 5.8.1 Arbitrage
    • 5.8.2 Currency Properties
    • 5.8.3 Currency Risks
    • 5.8.4 POW Camp vs Real World
    • 5.8.5 Taxes
    • 5.8.6 Depoliticize Money?
    • 5.8.7 Bitcoin
    • 5.8.8 Conclusion
  • 5.9 Environment
    • 5.9.1 Effects
    • 5.9.2 Exchange Value vs Planet Earth
    • 5.9.3 Idiots
• 6. Book Takeaway

1. Book Classification

• Economics, History, Finance

2. Book Background

• This is an introductory book that aims to describe the current economic system of the world.
• Note that the book was written in 2013. English translation first available in 2017.
• Influenced by the following four books:
  1. Guns, Germs, and Steel by Jared Diamond
  2. The Gift Relationship by Richard Titmuss (in turn, influenced by The Great Transformation by Karl Polanyi)
  3. The Worldly Philosophers by Robert Heilbroner
  4. Payback by Margaret Atwood
• Other influences:
  1. Karl Marx
  2. Ancient Anthenian tragedies (as analogies)
  3. John Maynard Keynes (his clinical dissection of so-called fallacy of composition)
  4. Bertolt Brecht (his irony and insights)

3. Book Structure

1. The book opens with the premise that there is inequality in the world. One need not be an "expert" to understand why this is the case.
2. It then traces the history of market society, marked by the triumph of "exchange value" over "experiential value".
3. Following this, it explores how the connection between "debt" and "profit" changed — The Great Reversal.
4. The workings of the banking system is examined next — The Great Amplifier.
5. Attention then turns to two crucial commodities — Human Labor and Money — that underpin market society.
6. The book also delves into how technology and automation intersects with the market society.
7. Then, the book discusses what "money" is and how it functions. It also warns that it is not possible to "depoliticize" money.
8. Finally, the book discusses the consequences of market society on the environment.

4. Book Objective

• The objective of the book is to make economics — that affects everyone — accessible to the layperson so that they can make well-informed decisions.

5. Book Thinking

5.1 Introduction

The author tries to paint a vivid picture of the current economic system of the world. It is his hope that he can make economics accessible to laypeople, removing it from the grip of so-called "experts", who are in reality, no better than astrologers (albeit, equipped with mathematical models) when it comes to economics.

5.2 Why So Much Inequality?

Yanis begins the book by asking the so-oft asked question: Why so much Inequality? He says that it all started with surplus quantity — the problem of uneven distribution of surplus is why inequality exists. This problem of inequality has always existed. However, in recent times, the process that leads to uneven distribution has exacerbated the difference. In a thought-provoking manner, he challenges us to understand that the same process that leads to our affluence may be the same process that leads to someone else's poverty.

5.3 History of Market Society

Yanis moves on to describe the origins of "market society" (an acronym for capitalism; he doesn't use this word because of its ideological baggage). There was a time in history when the economy was family-centric; most items that we now buy from the market (e.g: bread, eggs) used to be made at home.

Market Society has three essential components:

1. Capital Goods (raw materials, tools, infrastructure)
2. Land — where the above is processed in a factory
3. Human Labor — operates on land using capital goods to turn it into a finished product.

Market societies came about when the above three components slowly transitioned away from having an experiential value to acquiring an exchange value. Previously, serfs used to live on land owned by land owners — they would give a set percentage of their harvest to the land owner as compensation for living on the land. However, as the land owners began to notice that the merchant class was becoming increasingly affluential through their trade, they decided to use their land to take part in the global trade (industrialize the land, if you will). This required ousting the serfs, who became "free" and homeless at the same time. To have any chance of surviving, the serfs had to turn their labor to exchange value for the many industries that were popping out.

Yanis recognizes that this process had some merits (end of oppression, injustice, and wretchedness of serfdom). However, new freedom came with new chains; the serfs were now required to be industrial workers or farmers. Wage laborers were free to do as they pleased, but only as long as they managed to find employers for their labor. Thus, the tipping point when market societies became established came when exchange value triumphed over experiential value.

Thus, Yanis says: "The type of globalization that spawned the Industrial Revolution gave rise to the Great Contradiction: the coexistence of unimaginable new wealth and unspeakable suffering."

Globalization that appears to have interconnected humanity is also the process that exacerbates inequality between us. Quite the double-edged sword, yikes! To the question if the profit motive is equal to greed, there is a difference: profit motive has become institutionalized, whereas greed — the human tendency to amass wealth — is not.

5.4 Debt and Profit

Then, Yanis moves on to describe how debt and profit are interlinked. He says that it was debt (not coal) that is the real fuel that powered the engine of market societies (capitalism).

Since exchange value triumphed over experiential value, the tendency to help someone because "it was a good thing to do" slowly withered away to become "how can I profit out of helping someone? (by charging them interest!)" .

Before, charging and paying interest was seen as a grave sin in Christianity and Judaism. Now, it is no longer deemed a sin.

Thus, the process transitioned from:

flowchart LR
    Production --> Distribution --> DebtCredit

    Production[Production]
    Distribution[Distribution]
    DebtCredit[Debt-Credit]

to:

flowchart LR
    Distribution --> Production --> DebtCredit

	Distribution[Distribution]
    Production[Production]
    DebtCredit[Debt-Credit]

i.e., distribution of surplus came before production! This is the Great Reversal — debt became the essential lubricant of the production process. This is also how profit became an end in itself (instead of a means to an end) — without it, the new entrepreneurial class could not survive.

In market societies, all wealth is nourished by debt, and all the unimaginable riches created over last 300 years ultimately owe their existence to debt. This is also how entrepreneurship came to be seen as a way of escaping wage slavery. One key point that Yanis emphasizes is that Industrial Revolution could not have happened without the suspension of dogmatic rejection and legal prohibition of charging interest on debt. In his analysis, he says that the rise of Protestantism played a crucial role in this. It was through Protestantism that the ideal example of a newly empowered, autonomous person — the entrepreneur — came to rise. The Protestant ethic also embraced interest-bearing loans and profiteering as part of God's plan.

Yanis also contrasts two personalities: Scrooge (someone who hoards money, does not spend) vs Faust (someone who enjoys life to the fullest, agreeing to pay good interest). Market societies want more Fausts than Scrooges because they keep market societies running. Thus, this is how being indebted, which was seen as evil back in the day, came to be seen as okay, as long as you redeem yourself by paying interest + performing good deeds.

5.5 Banking

Now, Yanis begins to explain the black magic of banking — the system that recycles the money in the economy. Once usury was no longer considered a sin and bankers were allowed to charge interest on loans, bankers began to acquire superpowers.

5.5.1 Banking Before

It is believed that bankers act as intermediaries between savers and borrowers. Thus, the process was something akin to:

flowchart TD
	A["1\. Take Deposit from Savers"] --> B["2\. Lend it to Borrowers"] --> C["3\. Pay less interest to Savers than they charge Borrowers"] --> D["4\. Profit from the difference"]

5.5.2 Banking Now

While banking began like this, it is not true of today's banking. Bankers now are able to create money out of thin air! To explain this point, Yanis gives the following example:

A tipping point comes when the loans issued are so vast that the economy cannot keep pace and profits being made are no longer sufficient to repay them. When large quantities of value borrowed from the future actually fail to materialize, the economy crashes.

flowchart TD
    subgraph Phase1 ["Collapse Begins"]
        A["1\. Miriam closes business"]
        B["2\. Workers unemployed"]
        C["3\. Shops suffer"]
        D["4\. More shops close"]
    end

    subgraph Phase2 ["Banking Crisis"]
        E["5\. Bank stuck with unpaid loans"]
        F["6\. People withdraw savings"]
        G["7\. Banks lack cash"]
        H["8\. Savers go penniless"]
    end

    subgraph Phase3 ["Systemic Breakdown"]
        I["9\. Everyone owes but can't pay"]
        J["10\. Recycling reverses"]
    end

    subgraph Phase4 ["Housing Crash"]
        K["11\. Families can't repay housing loans"]
        L["12\. Too many houses on sale"]
        M["13\. House prices collapse"]
    end

    A --> B --> C --> D --> E --> F --> G --> H --> I --> J --> K --> L --> M

Thus, the very same process that generates profit and wealth, generates financial crashes and crises.

5.5.3 State Intervention

At this point, the state has to intervene to avert the crisis. The first thing they do is lend money to banks so that they can remain open. The state gets the money from the Central Bank (Federal Reserve in the U.S.).

Central Bank also gets their money from "thin air". The Central Bank will lend money to Private Banks by conjuring numbers in the account that Private Banks have with the Central Bank. The reason for lending is not profit-making, but to prevent the economy from crashing. Even though the Central Bank acquires some authority over Private Banks (by dictating which it chooses to save vs not save, for example), in reality, it is a cat-and-mouse game between them — The Private Banks will keep evading obstacles to start uncontrollable fires that the Central Bank is forced to extinguish by creating rivers of new money.

5.5.4 Pre-Modern vs Modern Money

Here, Yanis claims that the technology to conjure money out of thin air is nothing new; it is the same as what existed in the past, namely, inscribed shells — What mattered then and what mattered now is that:

(1) the numbers on those shells or figures on ledgers are "believable"; and
(2) productivity of land and the wealth and stability of the state make those promises of grain/currency "trustworthy"

However, Yanis asserts that what is terribly modern and different for market societies is the fact that private bankers (and not just the authorities) now have the same privilege of conjuring money from thin air as well.

5.5.5 The Bankers and The State

Yanis also says that bankers and the state are in a toxic relationship. If bankers know that the state will come to rescue in their time of need, what incentives do they have to limit loans during good time? Why not just save banks but not serve the bankers? This is where he states harsh realities:

1. Politicians in charge of government are elected with the help of large contributions from those same bankers (lobbying?). Politicians need bankers as much as bankers need them.
2. Officials of Central Banks join Private Banks once they retire from public service.

Thus, the state and the bankers are in cahoots with each other.

Thus, the more stable and safer conditions to create debt, more exuberant the bankers become, thus causing greater instability. Therefore, the market society system is inherently unstable and prone to generating inequality.

5.5.6 Unpayable Debts

What happens when a borrower goes bankrupt and is unable to repay his debts? Yanis says that the practical solution is to "write-off" the debt. Back in the day, debtors were looked down upon and even imprisoned. Some countries now (like Yanis's country, Greece) are treated the same way.

But, he says, market societies can only function if not all debts are held sacred. There are two main reasons:

1. Allows entrepreneurs to keep taking risks in spite of failures
2. Avoids situation as described in The Grapes of Wrath, where
   1. entrepreneurs whose personal money is involved and are facing the prospect of unpayable debt, deliberately damage produce — even if other people are starving — so that they can shortage of fruit that will boost its price.
   2. Same applies to governments who, when faced with the prospect of permanent bankruptcy, will begin extracting taxes from businesses and families endlessly without ever recovering.

Thus, the whole concept of Limited Liability Corporation (LLC).

Yanis says that creditors, especially bankers, will not like the idea of debt forgiveness. Bankers will pull every string they can to convince politicians to legislate against debt forgiveness. It is the bankers who are most responsible for the recklessness and it is bankers who are least likely to suffer consequences for their recklessness. Yanis also states the following crucial point — private wealth was built and then maintained on the back of state-sponsored violence.

Thus, wealthy people need state governments, even if they pretend to be against the government for taxation. Even though the rich benefit from the state (not just through state-sponsored violence, but also through public infrastructure), the rich will do whatever they can to avoid paying taxes.

5.5.7 Public Debt

Yanis also states that public debt is the "ghost in the machine". The rich figure out ways to pay less taxes and even taxes from workers tend to be low. So, the government needs to borrow money as public debt from the bankers. The flow is as follows:

flowchart TD
    A["1\. Government borrows $100 million from a banker (10 years)"] --> B["2\. Government provides IOU (a bond) to the banker"]
    B --> C["3\. IOU is a guarantee to repay the money with $5 million/year interest for 10 years"]
    C --> D["4\. Rich don't pay enough taxes, so government issues more bonds to banks"]
    D --> E["5\. Government uses bond money to pay for public goods (streets, hospitals, schools, etc.)"]

Yanis says there are two advantages to this:

1. The government directly boosts the whole recycling process of the economy from which everyone benefits, including the banks.
2. Bankers have access to something they can sell and liquidate in a jiffy so as to pay demanding depositors. Government bonds are perfect for this because they are always in demand as long as there is trust in the government. No other debt can be recycled quite as easily as a government bond.

In bad times, when bankers demand the state's central bail them out, the central bank:

• bails them out by creating more money out of thin air
• issues even more bonds
• uses these bonds to borrow money from other bankers, often foreign ones
• passes off the money to the local bankers.

Thus, Yanis asserts that public debt is a necessary response to the refusal of the rich to pay their share — it communicates the market society's power relations. It also acts as a shock absorber that allows accident-prone bankers to avoid major mishaps that would otherwise occur in its absence. It is an elastic band holding everything together, capable of stretching during bad times to prevent the system from breaking. Therefore, Yanis cautions us that when politicians, economists, and commentators talk about public debt as if it is a curse, do not pay heed to them as it necessary for the functioning of market societies.

5.5.8 Conclusion

Finally, Yanis reminds us that bankers are just amplifiers. The root causes of market society's fundamental instability lies elsewhere, in the peculiar commodities: (1) Human Labor; and (2) Money, which we explore next.

5.6 Two Conflicting Markets

Yanis provides insight into how the labor market and the money market works. First, he chastises the unemployment deniers who say that the unemployed themselves are to be blamed for not having a job because they don't provide any "value". He says that even if the jobless person was to work for pennies, it is likely to bear no consequence on the job market. He explains this using an analogy inspired by the French Philosopher Jean-Jacques Rousseau, which ultimately means:

Essentially, success can only be attained collectively and one needs to have faith in everyone playing. Even if one player loses hope, it will affect other players' optimism and eventually cascade into failure, making it a self-fulfilling prophecy.

If a businessperson wants to hire an employee, the decision to hire will depend on two exchange values:

1. How likely is it that this potential employee will produce something that will increase the revenue of the business?
2. The decrease in exchange value due to the cost of hiring and maintaining the employee

The businessperson will only hire the employee if he/she is confident that there are enough customers out there willing to buy the extra output that the employee will produce minus the employee's expenses so that there is a profit. Essentially, $Profit=SellingPrice-CostPrice$.

Thus, the labor market is based not just on the exchange value of labor but on people's optimism or pessimism about the economy as whole. The psychological state of mind plays a crucial role in determining the state of labor of market.

If trade union bosses were to reduce wages of their member thinking it will boost jobs (by falling for the logic of unemployment deniers), it may well have the opposite effect: the businessperson may think that if the wages are falling, things must be tough out there. So, even the capacity of consumers to pay will decrease. Thus, the businessperson is highly unlikely to hire more workers.

Yanis also addresses the claim that there will be more jobs when the interest rate is lower as the businessperson will be able to borrow more money for less cost. He says that this logic is similar to that of unemployment deniers. The businessperson will think more along the lines of: For the Central Bank to be cutting interest rates so drastically, things must be looking terrible — forget about hiring!

Hired labor and borrowed money are only a means to an end. Yanis then explains labor and money using the following simile:

Both labor and money have the capacity to drive the engine but also to bring it to a standstill and prevent it from starting again. Therefore, these two markets are crucial to the operation of the economy and they are also not straightforward because of the psychological component involved in it.

Yanis says that to come out of the loop of self-fulfilling prophecy of these two markets, it will require a reorganization of society that is every bit as radical as the transformation of the Great Reversal that took place in 18th century Britain was.

Will the process of mechanization and automation be one of those radical transformations? Yanis addresses this next.

5.7 Automation

As the quest for seeking profit became an end in itself, entrepreneurs were willing to do anything necessary that would give them a competitive edge against their competitors. Thus, any feat of engineering and technology that conferred an advantage to them, was heavily invested in and swiftly adopted. Yanis states that James Watt's steam engine and many other inventions became integral to market societies only because of profit motive and competition between profit-seeking entrepreneurs. If the steam engine was invented in ancient Egypt, for example, Yanis says that the widespread adoption of this invention would likely not have taken place due to absence of any competition.

5.7.1 Is Technology Benefitting Humanity?

A self-perpetuating process ensued where, at first, entrepreneurs would gain competitive advantage as the new invention would enable more production per worker. As the technology became widespread and adopted by other competitors, the advantage conferred was canceled out. We now live in a world that has become increasingly mechanized.

5.7.2 Why Humans are still Necessary?

Why are humans still needed if we have made so much technological progress? Yanis says that this is because:

flowchart TD
    A["1\. Market societies rely on profits"] --> B["2\. Profits arise from Selling Price - Cost Price"] --> F["3\. Automation reduces Cost Price"] --> G["4\. Fierce competition lowers Selling Price"] --> C["5\. Profits are squeezed to a minimum"] --> D["6\. Robots replacing humans don't buy the products they help produce"] --> E["7\. This reduces demand"]

Thus, Yanis says that the likelihood of (Selling) Prices plunging more quickly than companies can cope up is greater thanks to automation that is happening at a furious pace. The sequence that unfolds is as follows:

flowchart TD
    A["1\. Entrepreneurs borrow from the future to invest in machines, but profits disappear as prices collapse."] --> B["2\. Falling prices lead to huge losses for inefficient businesses, causing them to fail."] --> C["3\. Entrepreneurs inform banks they can't repay their loans."] --> D["4\. The crisis begins, triggering an economic crash."]

When such a crisis happens, a resurgence of human labor takes place. A smart entrepreneur would increase (Selling) Price since competition diminishes during such a crisis. Then, it becomes cheaper to hire workers than to employ machines. Yanis alleges that this is what happened after the economic crisis of 2008.

Employers' most intense desire is to eliminate the troublesome human element from their businesses while maintaining ownership of their machines' products and profiting from this monopoly. But, profit-hungry employers find that automation has the opposite effect of what they were hoping for: loss of profit, and worse still, a crisis that may well bankrupt them.

This is the contradiction of market societies. The human element can never be fully removed.

5.7.3 Mechanizing Humans

Yanis also says that market society's particular take on technological innovation is not just a question of replacing workers with robots, it also involves mechanizing human workers when their wage makes them more attractive than robots. Employing humans come with the advantage that workers recycle their wages, ensuring that there is a market for T-shirts and other products. If the wages of the workers fall, then there will come a point when wages are too low to support the sales of goods they help produce. Thus, Yanis concludes that it is in the best interest of market societies that workers resist their mechanization as this alone can put brakes on the profit-destroying process of automation!

5.7.4 Automate Fully?

Yanis also suggests that to automate production fully, one needs to develop machines that can design and build new machines. The greatest exchange value is produced by designers, not production-line workers or foremen. Yanis cites iPhone as an example for this. If iPhone costs $600 to make, <$150 goes to factory that built it in China. Rest (>$450) is kept by Apple as payment for its so-called intellectual property (IP) rights. As long as highly skilled human labor remains necessary, full automation of the production process will not happen.

5.7.5 Speculation

Next, Yanis speculates about super-intelligent AI and how it will affect jobs. As long as those who control technology are determined to use it in order to increase their own profits and enhance their own power, Yanis thinks that it is hard to visualize current jobs being replaced by new ones that only humans can do well. A different kind of Great Transformation needs to take place, where everyone 'owns' a portion of machines of every company. The effect of distributing profits would be to ensure prices remain more or less stable while income rise, thus making products increasingly more affordable.

Essentially, a way to recycle profits by re-distributing it to everyone.

The roadblock to the above vision is the fierce opposition of the tiny but very powerful minority who own the existing machines, land, office blocks, and of course, the banks.

5.8 Money

Next, Yanis explains how money functions through the prisoner-of-war camp example of Richard A. Radford.

5.8.1 Arbitrage

He starts out by explaining the concept of arbitrage — the practice of buying for a lower price in one market and selling for a higher price in another market. As more people do it, the competition rises, which squeezes the profit of the trader. Eventually, prices become so competitive that it becomes common knowledge what is the worth of items (coffee and tea, in this case). Thus, the traders establish the price of these items and work themselves out of a job. As prices stabilized, notice boards appear, announcing the prevailing exchange rate in the market. For example:

These notice boards, in real life, are Bloomberg screens where shifting prices for oil, gold, company shares, and government bonds. Their job is to facilitate spread and reduce the chance of arbitrage in the process.

In the camp, cigarettes quickly become a currency due to its experiential value (to smokers) and exchange value (to everyone, including non-smokers).

5.8.2 Currency Properties

A currency should have some basic properties:

1. It should be durable and non-perishable;
2. It must be convenient to carry;
3. It must be easily divisible into smaller portions;
4. Its appeal must be evenly spread throughout the community.*

Cigarettes functioned the following way in the camp:

1. in demand due to its experiential value (smokers craved it);
2. as a means of exchange allowing for easy and immediate comparison;
3. could be stashed away to save and create a nest egg.

5.8.3 Currency Risks

Saving cigarettes gave rise to the opportunity of lending them to other prisoners in return for interest. One risk was that the borrowing prisoner might not pay the lender back, known as the risk of default.

Another risk was that an external agency like Red Cross could introduce extra cigarettes but keep the quantity of chocolate, tea, and coffee the same. This would reduce the value of cigarette, i.e., each cigarette would buy less coffee, less chocolate, and less tea. This is called price inflation. The converse would be if the total number of cigarettes in the prison is reduced but the commodities it can buy is kept the same; this would lead to price deflation. In short, the purchasing power of a unit of currency has nothing to do with how much it costs to produce but rather, its relative abundance or scarcity.

Even if a prisoner were to hoard his cigarettes, if the Red Cross introduces tons of cigarettes to the camp, the exchange value of the cigarettes will go down and the prisoner's abstinence will be to no avail. Thus, having access to a currency lubricates transactions to no end. On the other hand, for a currency to function properly, requires trust (everyone will accept this currency) and faith (exchange value of currency will be maintained). Remember: What gives value to coins and paper money is the legal obligation to accept them and the belief that they are and will remain invaluable.

In the context of inflation and deflation, the interest rate is the most important metric to consider. The expected fluctuations in the overall quantity of money influences interest rates significantly — expect inflation if interest rate increases and expect deflation if interest rate decreases.

It is also important to keep in mind that economics, unlike nature, is influenced and shaped by what we think of it. When prisoners assumed they will be in prison for a long time, the prices tended to stabilize. When they assumed that the war was going to end soon and they will be liberated, nobody wanted to save, and hence, interest bankers offered to savers skyrocketed. At the same time, non-savers smoked the cigarettes they accumulated and the debts they owed to others literally went up in smoke.

Thus, Yanis reminds us that a monetized economy cannot be sustained if everyone knows its end is nigh. The very anticipation of collapse is enough to cause collapse because a currency requires trust in its longevity to function.

5.8.4 POW Camp vs Real World

Yanis reminds us that there is one fundamental difference between the POW camp and the real world — The Red Cross was impartial because they had no idea how the cigarettes they were delivering to the camp was used as a currency; in the real world, it is as partial as it gets.

Back in the day, gold was a popular medium of exchange:

1. does not corrode and retains its shine;
2. only a finite amount in the world.

But, we transitioned from gold to paper currency even though paper currency is not intrinsically valuable:

Moreover, we have already transitioned to making payments through the digital world. All this is possible because what makes currency function — is trust. And trust is rendered through the ruler.

The ruler, in order to protect the people's trust in their currency (and even from their own greed) would have few checks and balances.

Every time the ruler wanted to wage a war or build a new temple, the temptation to reduce the amount of precious metal that went into the coins so as to produce more of them proved hard to resist.

After all, each coin would be worth less and price inflation would take hold; people found their wages and savings lose value; the economy would falter, bringing the entire currency into jeopardy if trust in it failed entirely.

Yanis says that as time changed, the rule of law was imposed upon the rulers by the ruled, limiting the extent to which the kings could plunder his subjects, impose taxes at will, confiscate their land, and incarcerate them when they resisted.

5.8.5 Taxes

Taxes were (and are) important, Yanis says. They are an important source of funding for various projects benefiting broader segments of the population. Even the rich realized that a welfare state was an excellent insurance policy for their peace of mind.

There are two ways:

1. Public Debt (Deficit-Financed State Expenditure);
2. Create more money, either via banks or via the central bank.

However, the drawback is that politicians dislike increases in public debt (due to competition from the opposition). Hence, there is a tendency to quietly increase instruct the central bank to create more money with which to pay for the things that society needs badly. But, moneyed classes bitterly resist this solution (due to price inflation that introducing more money causes). The wealthy then go on a campaign to "depoliticize" central banks and make them independent of government — taking away the politicians' power to instruct the central bank to increase the money supply.

5.8.6 Depoliticize Money?

The short answer is, no. Another major difference between the POW camp and real world is that in the camp, debt and taxes are unrelated to the supply of money; but in market societies, they are inextricably linked.

A short reminder: The magical power of bankers to create money and the overall demands of a market society generate an urgent need for public debt — the ghost in the machinery, as previously discussed.

Yanis asserts once again that it is the public debt which pays for the infrastructure on which the whole economy functions; it boosts the recycling process when it slows, and provides overexcited bankers with their "most liquid of assets".

In turn, public debt engenders a new urgency in the state to collect taxes, if only to keep repaying part of the public debt. Even though the rulers may be tempted to debase their currency in order to profit themselves, they restrain from doing so by the knowledge that it would reduce the value of the taxes they received.

If money were depoliticized, the following decisions have to be made independently of politics:

• How much government spends and on what;
• How much tax the state collects and from whom;
• What bankers should be allowed to get away with;
• How to deal with bankers when they go bankrupt

Answering these questions are the very definition of politics; can be undemocratic when made by the oligarchy, but can never be apolitical.

In the camp, money was apolitical because supply came from an independent source — the Red Cross. But authorities in control of money in the real world know the people they have over economy and the likely consequences of their decisions. So, it is difficult to see how they will not be politicized.

Even if central banks remain independent of elected politicians, we still end up a central bank that is outside the supervision of Congress, but ends up more dependent on the political and financial might of the powerful few: the oligarchy and the bankers.

5.8.7 Bitcoin

Yanis then discusses about a new phenomenon that is attempting to depoliticize money — Bitcoin. Yanis is highly skeptical of Bitcoin being the solution to depoliticizing money.

In Bitcoin, the ledger is no longer maintained by Central Authority, but by everyone. Some common features discussed:

1. Responsibility for policing transaction decentralized;
2. The transaction task done by the entire community using Bitcoin by making available a small part of their computer's capacity;
3. Everyone would observe every else's transaction, ensuring validity;
4. Safeguarding privacy by not revealing those transactions they were observing.

Reasons why Yanis does not like Bitcoin:

1. Hard to protect people from fraud and theft
   • In this context, Yanis mentions an incident where entrepreneurs exploit people's fear of hacking and in the guise of safeguarding, disappeared with Bitcoin coins worth millions of dollars
2. Lack of a state-backed insurance scheme
   • The State is ultimately the only insurance policy against organized crime
3. Price Deflationary Effect
   • Since no intervention in the money supply should be possible lest this intervention be manipulated by governments or bankers, it is possible to adjust the total quantity of money in the system in response to a crisis — and this may make a crisis worse.
   • As the total supply of Bitcoin is fixed, it may lead to a price deflationary effect as each Bitcoin will be worth more and more with limited supply and increasing demand.
   • If Bitcoin is expected to appreciate in value, people may hold onto it rather than spend it.
   • Less spending means lower demands for goods and services, which can push prices down (deflation).
   • Yanis asserts that this can lead to fall in sales due to Bitcoin's deflationary effect adding a destabilizing factor to the bankers' standard over-exuberance and spark a crash more readily.
   • If a crisis hits, it will become impossible to reflate the economy by increasing the quantity of money.
   • After a crash, typically, the government replaces some of that missing money quickly, rescuing banks (not bankers) and spending on poor, public works, and so on.
   • But such swift action is not possible under Bitcoin, whose supply is fixed and outside the authorities' grasp.
   • Yanis says that none of this is speculation. He cites the crash of 1929 as an example.
   • In 1929, the governments were determined to keep the money supply in unchanging proportion to the amount of gold they possessed — a policy known as the Gold Standard — very close in spirit to the aversion to political money that lies behind Bitcoin.
   • Only after British Government in 1931 and President Roosevelt's so-called New Deal government in 1933 decoupled the quantity of currency from gold holdings that some relief came.

According to Yanis, the idea that money can be kept separate from the state and from the political process that leads to the formation of our governments and their policies is a dangerous illusion.

5.8.8 Conclusion

In conclusion to this chapter, Yanis says that he thinks controlling the money supply is our only faint hope. But any such intervention will affect different people — the rich and propertied on the one hand, the poor and powerless on the other — differently, it can never be impartial. He calls for us to accept that money is inescapably political, so there is only one thing that can be done — democratize it! Give the power to control it to the people on the basis of one person, one vote. But to democratize money, we need to democratize our states first.

5.9 Environment

Yanis touches on a key point by citing Agent Smith in the Matrix:

The quote touches on the following important questions —

5.9.1 Effects

Yanis lists the following things humans have done to the environment:

5.9.2 Exchange Value vs Planet Earth

Yanis laments that the emerging of market societies led to exchange value triumphing over experiential value.

1. This triumph is directly responsible for producing unimaginable wealth along with untold misery.
2. It led to mass-mechanization, exponentially increasing the quantity of products humans could fabricate. (Follow-up: Investigate the contradiction of cheap consumer goods and expensive needs).
3. It also turned workers and employers alike into the machines' mechanized servants.
4. But worst of all, it led to humans directly threatening Earth's capacity to maintain life.

The prioritizing of exchange value over experiential value makes even a major disaster an economic success. Yanis cites the example of forest fires to explain this:

Yanis states that the destruction of environment is not new. It is true that in pre-modern times, humans have had an adverse effect on the environment. He cites two examples for this — Easter Island (Chile) and Aboriginal Australia.

Taking Australia as a concrete example:

5.9.3 Idiots

Yanis mentions that in Greek, a person who refuses to think in terms of the common good was called an idiotis — a privateer, a person who minded his own business. Market societies has turned us into idiots. He goes on to say that it is possible to live in equilibrium with the environment. He seems to believe that regulation is a way to curtail profit-seeking behavior. For example:

Another way is to grant legal rights to nature. For example:

The most important question in this regard is:

The answer to this depends on who you ask. Landless workers will want the solution to be collective ownership. On the other hand, the minority who owns lands and machines will want to corporatize the environment. Their argument is that the governments serve the interests of those who run it — politicians and bureaucrats. The interests of these do not represent the majority of people or the planet at all. They dismiss cooperation as a romantic idea — it is akin to everyone sitting around and chatting endlessly paralyzed by complexity. But, what happens if we give planet's natural resources an exchange value? Though the full privatization of nature has not yet happened, a government-regulated compromise is already underway.
For example:

Merits of the above system include:

1. Companies that can pollute less than their entitlement have the incentive to do so because the less they pollute, the more money they stand to make from selling their remaining quota.
2. The price a company pays for being allowed to pollute more than its quota is determined by supply and demand in the market, instead of being set by untrustworthy politicians.

But, Yanis says, the irony of the above solution is that the only reason this solution is sought because the government can't be trusted. Yet, the only reason this solution works is because it depends entirely on the governments for it to work! Only the state has the ability to create this artificial market because only the state has the power to regulate each and every company.

The real reason why the rich and powerful (along with their intellectual and ideological supporters) recommend complete privatization of our environment is not that they are opposed to the government:

• They're just opposed to government interventions that undermine their property rights and threaten to democratize processes that they now control.
• And if in the process, they get to own planet Earth, that's OK by them too!

The only practical solution, Yanis says, is authentic democracy. You can take money out of politics, but you cannot take politics out of money. Any attempt to depoliticize the regulation and management of the money supply would choke the economy and prevent recovery in the event of a crash. Thus, Yanis says, a decent raditional society must democratize:

1. Management of Money;
2. Management of Technology; and
3. Management of Planet's resources and ecosystems.

Yanis quotes Winston Churchill in this regard:

It is a battle of: "Democratize everything!" vs "Commodify everything!".

Yanis says that commodification will never work:

• Markets do a great job when it comes to managing the supply of coffee shops in a city, and the distribution of goods among buyers with different tastes.
• But they are terrible at managing money, labor, and robots.
• As for the environment, the market solution combines the worst of the market with the drawbacks of state intervention.

Yanis says only "one person, one vote" can save us. Not "one dollar, one vote."

The consequences for the environment are pretty dire. Yanis says either we can drastically reduce greenhouse gas emissions or let the polar ice caps melt (which in turn would cause the sea level to rise -> resulting in loss of millions of people's homes and farms in low-lying coastal areas such as Bangladesh and Maldives).

If, Yanis says, we privatize the atmosphere and the decision to what action to take lies in the hands of people whose wealth means they will never be affected by rising sea levels:

Finally, Yanis concludes that even though "democracies are imperfect and corrupt does not change the fact that democracy remains our only chance to avoid behaving, collectively, like foolish viruses."

6. Book Takeaway